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Tuesday, January 16, 2018

Air India to be split into 4 separate entities for sale: Minister

MoS Civil Aviation Sinha

CENTRE will break up debt-burdened national carrier Air
India into four separate companies and offer to sell at least 51 percent in
each of them as part of a disinvestment proposed by Prime Minister Narendra
Modi. The core airline business comprising Air India and Air India Express, the
low-cost overseas arm, will be offered as one entity, and the process... will be completed
by the end of 2018, Minister of State for Civil Aviation Jayant Sinha said. Its
regional arm, ground handling, and engineering operations will also be sold
separately in the same process.

With over Rs. 50,000 crore in debt, five subsidiaries and a
joint venture (JV), and a combined workforce of 27,000 Air India has been running
into losses. So, a successful disinvestment of the Maharaja will be a huge
relief for Prime Minister Modi.

The airline, now trying hard to stay afloat on a
taxpayer-funded bailout, has strained government finances for decades, and
Finance Minister Arun Jaitley said last year that money spent on Air India
could have been used for education.

"The aviation sector is a very fast growing sector,
with really exciting opportunities for all participants, so we felt all of this
will unlock growth and competitiveness of Air India group," Sinha told PTI.
"We expect it to be a very bright future for its employees."

Though the minister declined to name potential bidders but he
said management control will be retained by local investors. The government
altered foreign investment rules last week, allowing foreign airlines to own as
much as 49 percent of Air India. Investors' interest will be sought by end of
this month, Sinha added. The government has earlier said that most of the debt
owed by the carrier will be retained on the government's balance sheet, while
borrowings linked to core operations will be passed on to the new investors. A
so-called special purpose vehicle will hold the unsustainable debt of the
airline, Sinha said. The Maharaja has been unprofitable since its 2007 merger
with state-owned domestic operator Indian Airlines Ltd. The company made an
operating profit of about Rs. 100 crore ($15.7 million) in the year through
March 2016, primarily due to a slump in oil prices. It still posted a net loss
of Rs. 3,840 crore, according to the government.